Innovative Practice China: Case Studies of Carrefour's Quality Lines

by Dinghuan Hu and Xia Dandan, Institute of Agricultural Economics and Development, Chinese Academy of Agricultural Sciences

Summary

In China, through the structural reform and the adoption of contracted responsibility system, land has been distributed to small scale farmers. This reform established the widely adopted small scale production model. Its supply chain is composed by a large number of small-scale farmers and small dealers. All the individuals are independent operating entities. There are no cooperatives and no long-term supply and demand relations. The supply of agri-food in China is regarded as stable and sustainable.

However, as a result of the absence of an effective organizational system, overuse of pesticides and chemical fertilizers are a constant in small scale production. Because of cases of food poisoning, since the mid-1990s changes have taken place in consumers' demand for food. This demand switched from quantity to quality, safety and diversity. This switch gave opportunity to supermarkets to enter the Chinese market. In 1990 the first supermarket was established in China and in 1995 Carrefour established its first supermarket in Beijing.

Carrefour entered the Chinese market with an innovative demand: the adoption of quality lines. The quality line is the control and supervising line conducted on raw and fresh agri-food. The standards are set from planting, processing and circulating in order to guarantee the quality and safety of products. To better control production Carrefour gives training and assistance to farmers along with a strong coordination of quality standards. Because small scale farmers are difficult to control, Carrefour works mainly with large scale farmers.

Clearly, the aim of Carrefour's quality line is to serve the interests of the supermarket and to raise Carrefour's competitive power. However, there is a far-reaching significance for Chinese farmers, agri-food processing enterprises and consumers. The development of Carrefour's quality line is gradually changing the agri-food production mode and technology in China. Up to the present, their potentialities are great and their role should not be ignored.

What were the potentials and limitations of private business models in promoting smallholder participation?

Potentials:

• Carrefour controls the quality of products, pushing small-scale farmers to decrease the amount of pesticide used.
• Carrefour formulates quality standards, keeping small-scale farmers aware of world standards and competition.
• Small-scale farmers who produce fruits or vegetables and grow pig or fish receive assistance from Carrefour to improve the quality of their production.
• Associations and cooperatives sub-contract small-scale farmers to deliver them the produce.
• Associations and cooperatives sell the produce to farms or associations and later on it finally reaches Carrefour.

Limitations:

• Up to now the co-operators of Carrefour's quality line are large scale farmers. Small scale farmers, who are excluded, account for more than 90% of agricultural population in China. Carrefour cooperates with only large scale farmers for convenience in management.
• Control of production and abuse of pesticide use are current problems that need to be solved for the inclusion of small scale farmers.
• In the case study it says that: it is impossible to require market changes to the direction favourable to the small-scale farmer households.

What factors explain the inclusion of the smallholder producers in the market chain (while others are excluded)?

• Selling produce to an association that sells their produce to supermarkets.

What are the costs and benefits of inclusion?

It is not very clear in the case study presented, but it seems that small-scale producers are not yet included in the Carrefour supply chain. However, it also seems that some small-scale producers are preparing themselves to enter the market channel. Some small scale farmers received training on how to improve their production and quality standards. The quality line gives farmers instructions, supervision and management in the process of production. Apparently, small-scale producers are learning to adopt more advanced food safety technology.

What does this all mean for efforts to promote smallholder participation in dynamic markets?

Carrefour's quality line is helpful to the popularization of China's safe and high quality agri-food. In a market with fierce competition, once an innovative point has brought economic benefits or competitive power for innovators, many imitators will certainly follow the steps. Carrefour is the first supermarket who sells safe agri-food with its own brand in China. This trend is helpful to optimize agricultural production technology and agri-food supply chain in China. The question now lays on how small-scale farmers may also be included in this trend.